The Cochlear Ltd (ASX: COH) share price is sinking on Friday morning.
At the time of writing, the hearing implant leader's shares are down 10% to $274.95.
This follows the release of its half year results.
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Cochlear share price sinks on results day
- Sales revenue increased 5% (6% in constant currency) to $1.17 billion.
- Cochlear implant revenue rose 12%
- Acoustics revenue surged 21%
- Underlying net profit increased 7% to $206 million
- Interim dividend lifted 8% to $2.15 per share
- FY 2025 profit guidance: Lower end of $410 million to $430 million range
What happened during the half?
For the six months ended 31 December, Cochlear reported a 5% increase in sales revenue to $1.17 billion and a 7% lift in net profit to $206 million. This was driven by Cochlear Implant and Acoustics businesses, which offset weakness in its Services business.
Cochlear implant revenue jumped 12% to $724.5 million, as unit sales increased 5% to 25,390. The adults and seniors segment remains the key driver, growing 10% in development markets, while demand for children declined slightly after a strong prior period.
Its growth was particularly strong in the US and Asia Pacific, though Western Europe saw some softness. Emerging markets grew by a modest 3%, impacted by lower-than-expected tender volumes. Encouragingly, private pay demand in China and India was a bright spot.
Meanwhile, Acoustics revenue soared 21% to $140.4 million. This was fuelled by the Cochlear Osia implant, which gained traction across new markets, including France, Italy, and emerging economies, while US demand surged 50%.
Acting as a drag on its results was the Services business. Its revenue fell 13% to $305 million. This reflects a strong prior period and lower upgrade rates. Management notes that the Cochlear Nucleus 8 sound processor, launched in FY23, saw strong early uptake, but replacement demand is now moderating. Additionally, cost-of-living pressures in the US have delayed upgrades, with patients reluctant to pay out-of-pocket for new technology.
Guidance update
Weighing on the Cochlear share price today has been management's guidance for the full year.
It revealed that it expects its net profit after tax to be at the lower end of its $410 million to $430 million guidance range. This reflects a weaker Services contribution and increased cloud-related investment. This is comfortably lower than consensus estimates for the year.
Commenting on its outlook, management said:
Services growth has slowed since launching the Nucleus® 8 Sound Processor in FY23. We had expected modest growth in revenue for FY25 and now expect a single-digit decline. We continue to work on initiatives to improve identification and connection with recipients who could benefit from the latest sound processing technology.
The introduction of the new off-the-ear Nucleus Kanso 3 Sound Processor from mid-2025 is expected to contribute to Services revenue from FY26. Acoustics growth rates are expected to be strong with continuing geographic expansion of the Osia System. The gross margin is expected to be around 74.5%, half a point below our longer-term target of 75%, due to lower overhead recoveries at the new facility in Chengdu.
